For what seems like a lifetime, we have all been looking for ways to keep our energy bills low. But there is some hope on the horizon – it looks like energy prices will finally fall in the second half of 2023. According to experts, we may see prices similar to what we had 12 months ago, back in mid 2022.
Neil Kenwood, Ofgem’s head of strategy confirmed this week that energy bills will be “down considerably on the £2,500 limit that applies at the moment” for the average annual household bill. Further predictions from analysts at Cornwall Insight suggests the fall may be as large as £438 below the current Energy Price Guarantee (EPG), making the average typical household energy bill in Q3 (July-September) will be £2,063. Similarly, Money Saving Expert, Martin Lewis predicted “a drop of 17.5% when the price cap comes out in July” when he spoke on Good Morning Britain earlier in the week.
Cornwall Insight then predicts in Q4 (October – December) energy bills could be around £2,098 for an average household based on typical use – a slight rise from the summer rate, but still lower than the EPG rate.
Further predications however could see in Q1 2024 (January-March) a slight rise in the price cap once again. The average typical use to be around £2,162 – this being lower than the current EPG but still a slight rise in comparison to the Q4 2023 prediction.
We will know the exact figure for July-September rates when Ofgem, the energy regulator announces the next price cap. on Thursday 25th May, a date for everyone’s diaries.
How does the energy prices cap effect business?
We know that the costs of potatoes have sky rocketed, times for chip shops and the hospitality/leisure sectors in general are really tough, with more people out of pocket than ever before.
Shelley Plant, co-owner of a fish and chip shop in Norwich commented that “Potato merchants are struggling to buy them in at a good price and unfortunately it means the wholesale price increases, so businesses like us feel it.
“We just have to try and absorb the cost elsewhere until hopefully the prices come back down again.
“Thankfully fish has dropped in price slightly so luckily we haven’t had to put our prices up but if we do I’ll have to explain to our customers why, because at the end of the day, you can’t compromise on quality.
“But we’ll survive and keep smiling through because we’ve had such great support from the community here who still come and get their fish and chips on a Friday.”
The news of energy prices falling have been welcomed across all business sectors across the UK.
With Jamie Collier, Director at Johnson Reed business finance commenting “Wholesale prices are back to where they were before Russia invaded Ukraine. But these prices falls haven’t been passed on yet so it will provide great relief to many when they do soon, affecting everyone’s domestic and business costs”.
How does the energy price cap all work?
Ofgem will announce the latest price cap next Thursday (25 May), which will come into effect between 1 July and 30 September. The energy price cap is reviewed quarterly, and takes effect in April, July, October and January respectively.
The energy price cap is the maximum price per kilowatt hour (kWH) in which energy suppliers can charge for energy if you are on a default tariff. Before the EPG replaced the cap, it was predicted that household bills would hit the £4,000 mark in January 2023. But, bill payers have been protected from this rise with the government intervention who created this cap to help households.
So far, the cap has been above the EPG, but this announcement on Thursday will be important as it will almost certainly reflect a drop in energy prices and it is likely to spark a return of fixed energy deals to the market.
This should provide a margin of relief for many households and businesses ac the UK, but with many still struggling, how can you still cut costs?
- Using the thermostat and timer to take control of your heating settings could save you about £150
- Reducing your combi boiler flow temperature to 60C could save you about £100
- Installing a water-efficient showerhead or having showers in four minutes could save you about £90
- Turning down radiator valves in less-used rooms could save you about £70
- Draught-proofing your doors, windows, chimneys and floors could save you up to £215
Dr Craig Lowrey, Cornwall Insight, commented on these latest updates: “As the wholesale energy market has levelled out in recent weeks, our predictions for the price cap have followed suit. Some energy suppliers will potentially look to leverage this opportunity to bring back fixed tariffs on or around the price cap, with stable projections lowering concerns they will lose out over the fixed term. This potential re-emergence of competitive tariff propositions presents an opportunity for households to finally get a grip on their energy bills, having been hit hard by the energy crisis. While this seems positive, fixing energy tariffs is a gamble, the market may go down as well as up, and households run the risk of getting locked into bills higher than the price cap.”
However, Lowry did caution energy prices was still unpredictable when looking at the future. It’s also important to note that while falling prices is good news, prices are still a long way from returning to pre-2020 levels.
“While consumers may feel more secure, we must not underestimate the fact that these bills remain unaffordable for many households. The global energy market and our heavy dependence on energy imports still impact bills. Moreover, unforeseen geopolitical events can easily disrupt the wholesale market again. It is crucial that the UK accelerates its journey towards energy self-sufficiency. Only by reducing our reliance on imported energy can we gain the confidence that bills will remain stable in the long term.”
